UK premium brand second-hand car industry could collapse

UK car sales figures since the start of the recession tell a fascinating economic tale – yet I am not quite sure what it is!

‘08

‘13

1

Ford

322,514

1

Ford

281,917

2

Vauxhall

298,912

2

Vauxhall

232,255

3

Volkswagen

179,189

3

Volkswagen

183,098

4

Peugeot

118,701

4

BMW

127,530

5

BMW

113,132

5

Audi

123,622

6

Toyota

105,717

6

Nissan

105,835

7

Audi

100,845

7

Peugeot

99,186

8

Renault

89,570

8

Mercedes-Benz

91,855

9

Honda

83,805

9

Toyota

84,563

10

Citroen

81,237

10

Hyundai

74,285

11

Mercedes-Benz

74,883

11

Citroen

73,656

12

Nissan

66,336

12

Kia

66,629

13

Fiat

55,325

13

Honda

54,208

14

Mazda

49,858

14

Skoda

53,602

15

Mini

40,736

15

Mini

51,324

16

Skoda

37,100

16

Fiat

49,907

17

Volvo

33,358

17

Land Rover

48,624

18

Land Rover

32,567

18

Renault

40,760

19

Kia

31,324

19

Seat

38,798

20

Seat

29,397

20

Volvo

31,790

21

Suzuki

29,095

21

Mazda

26,183

22

Hyundai

28,036

22

Suzuki

24,893

23

Jaguar

20,346

23

Jaguar

14,109

24

Chevrolet

18,372

24

Chevrolet

13,476

 25 Saab

16,074

25

Lexus

8,404

0

Other

62,252

0

Other

43,798

I would hazard a guess at something like this: the premium manufacturers, notably the big three German ones (BMW, Audi and Mercedes-Benz) have driven sales by offering wide-ranging ‘deals’, notably in the form of ‘dealer contributions’. This has meant, counter-intuitively, that sales of premium brand cars have risen during the recession, and indeed that the UK has outperformed almost all of Europe in overall car sales during the period.

There is an obvious problem. Downward pressure on new-car prices in the premium segment means there is little point in buying second hand. This in turn will place downward pressure on the second-hand sales of the very cars which were bought through ‘deals’ in the first place. Effectively, the saving owners feel they got on the new price will be wiped out by the comparative loss when they come to sell it on. A little like house prices prior to 2008, premium car prices since 2008 are artificial and do not provide an accurate assessment of real value (albeit the bubble is downwards rather than upwards initially). It is yet another false economy – literally.

That’s my guess. But what say the economists who actually know about these things?

For the record, the top 25 in Northern Ireland is available in an Ulster Bank report here.

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2 thoughts on “UK premium brand second-hand car industry could collapse

  1. harryaswell says:

    You cannot make “guesses” when it comes to anything economic. One would definately get one’s fingers burnt in today’s economy. These figures apply to the second hand market, surely, not the new sales market?? Any how, the figures do show a stagnant market, but with sales this year, 2013, so far showing a small increase over 2008. All is not lost it seems. Can this be an indication of those green shoots we hear so much about? Time will show. An economist with the right tools would have interesting comment to make. It is still correct, or so I believe, that a new car loses 25% in depreciation as soon as it leaves the showroom. That in itself would encourage most people to buy second hand anyway.

    • On your last point, that is a very common misconception. In fact it very much depends on the car, and particularly: a) whether it is a premium brand; and b) how many options have been added. German or Japanese Premium brands devalue less quickly (but my contention is that they will begin to devalue more quickly, at least against nominal purchase price before “dealer contribution); and *options devalue much faster than the car itself*.

      In other words, buy an Audi brand new with no added options, and it actually loses no value at all beyond the “on the road” costs when you drive off the showroom forecourt. However, buy a fully loaded Mondeo and your 25% figure may look generous!

      Anyway, the above figures refer specifically to newly registered cars – i.e. brand new or, very occasionally, import.

      The proportion of premium German brands among those has risen markedly, though more so in GB than NI.

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